Washington State's Chamber

President's Column

Monday, April 17

Small-business owners must speak up about Olympia tax talk

Raising taxes on “the wealthy” might seem like a great idea until you realize that many of the proposals coming out of the state Capitol would apply to small-business owners who don’t meet most folks’ definition of wealthy.

For example, a proposed 66 percent increase in the business and occupation (B&O) tax on service-sector businesses would apply to hair dressers, child care providers and car repair shops. In many rural areas, these are among the last remaining businesses.

Likewise, a proposed 7.9 percent capital gains income tax wouldn’t just apply to wealthy investors, but also to small-business owners who, after years of hard work building equity in their business, sell their business to support their retirement.

And, that’s just the start.

So far, these proposals haven’t gained much traction. However, lawmakers are scheduled to be in Olympia until April 23 – plenty of time to enact taxes that impact employers across the state. And, there is a common belief that the Legislature will head into at least one 30-day special session, and possibly more.

This means the discussions about how to grow government spending through new and higher taxes are likely to continue for a while, even as revenue from existing tax sources continues to rise thanks to a growing economy. In March, the state released figures showing revenue collections through 2019 are expected to increase by more than half a billion dollars over earlier projections.

One way to influence the debate is for small-business owners to speak up and share their stories about how new and higher taxes would directly impact them.

The capital gains income tax proposal is a great example of where the employer story needs to be told.

Billed as a tax on “the wealthy,” a Spokane restauranteur explained in a recent video that, as a small-business owner, the sizeable capital gains income tax proposal would deliver a large hit on the sale of his restaurant, cutting deeply into his life’s savings – his retirement – that is tied up in his business.

He’s not “wealthy.” He doesn’t have a 401(k) or pension plan. He has the self-created equity of his life’s work that has created countless jobs and contributed untold amounts of taxes to fund schools and services for our most vulnerable.

While that’s just one example, it rings true for many of the small-business owners across the state and rural economies that disproportionality rely on small businesses to create jobs.

Worse, these tax proposals come at a time when only pockets of the state are seeing solid job growth, while the majority of the state is still struggling with chronically-high unemployment. In January, state job numbers show that 27 of Washington’s 39 counties had unemployment rates of 7.1 percent or higher – nine of those counties were above 9.1 percent.

At AWB’s first-ever Rural Jobs Summit March 4, a bipartisan group of elected officials along with economic development, chamber of commerce and business leaders from both sides of the state pointed to tax uncertainty as big part of the problem with maintaining and creating jobs in rural regions.

Compounding that, attendees said, is regulatory uncertainty and delayed permitting for projects that would create high-wage jobs where we need them most.

There are many complex policy discussions ahead – from taxes to regulations – and we’re ready to have them. But, the best way to get to solutions that work for the entire state – every small town – is for small-business owners talk about the real challenges they face, such as new and higher taxes, and what can be done to help them succeed and create economic opportunity.

Together we can tell the story of what really makes Washington thrive. And together, we can bring shared prosperity and job growth to all 39 counties.